Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Mitsubishi Heavy Industries / Equity Bottom-Up

<ul>
<li>MHI's share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.</li>
<li>A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense &amp; Space have been factored into the price.</li>
<li>The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored. </li>
</ul>


MHI's share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense &amp; Space have been factored into the price.
The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored. 


Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up

Japan Specialist

Mark Chadwick

<ul>
<li>MHI reports impressive YoY growth in order intake, revenues, and profits across Energy Systems and Defense Equipment segments in Q2 2023.</li>
<li>Despite a 62% YTD stock price increase, strong order backlog and underlying drivers suggest resilience in a challenging economic climate.</li>
<li>The company benefits from global trends in decarbonization and increased national security spending, positioning itself as a leader in gas turbines and defense technology.</li>
</ul>


MHI reports impressive YoY growth in order intake, revenues, and profits across Energy Systems and Defense Equipment segments in Q2 2023.
Despite a 62% YTD stock price increase, strong order backlog and underlying drivers suggest resilience in a challenging economic climate.
The company benefits from global trends in decarbonization and increased national security spending, positioning itself as a leader in gas turbines and defense technology.


<ul>
<li>MHI remains our top pick on the energy transition in Japan and globally</li>
<li>The new next-gen nuclear reactor will be a significant improvement on the current technology and help Japan to become carbon neutral</li>
<li>We believe the stock is a bargain at book value and should be picked up on any correction</li>
</ul>


MHI remains our top pick on the energy transition in Japan and globally
The new next-gen nuclear reactor will be a significant improvement on the current technology and help Japan to become carbon neutral
We believe the stock is a bargain at book value and should be picked up on any correction


Mitsubishi Heavy Industries (7011) | New Nuclear Deal

<ul>
<li>MHI is selling at 9.9x EPS guidance and 0.7x book value, with a dividend yield of 3.0%. We see potential upside of at least 25% beyond the New Years bounce.</li>
<li>The shares have underperformed for several years due to serious managerial errors. But the mess is being cleaned up and new growth opportunities have emerged.</li>
<li>Risks include limited margins in the energy and aerospace &amp; defense sectors and the possibility of renewed investment in the failed regional jet aircraft project.</li>
</ul>


MHI is selling at 9.9x EPS guidance and 0.7x book value, with a dividend yield of 3.0%. We see potential upside of at least 25% beyond the New Years bounce.
The shares have underperformed for several years due to serious managerial errors. But the mess is being cleaned up and new growth opportunities have emerged.
Risks include limited margins in the energy and aerospace &amp; defense sectors and the possibility of renewed investment in the failed regional jet aircraft project.


MHI (7011 JP): Opportunity or Value Trap?

Thematic (Sector/Industry)

<ul>
<li>The power outage warning in Japan on March 22 highlights the precarious nature of energy security in Japan.  </li>
<li>The electricity supply issues come at a time when Japan grapples with high oil prices, Russian imports and still idled nuclear capacity. </li>
<li>The public attitude towards nuclear restarts is turning more positive. The primary beneficiaries will be <a href="https://www.smartkarma.com/entities/mitsubishi-heavy-industries" target="_blank" data-smartkarma-citation="entities:13613:1" rel="noopener">Mitsubishi Heavy Industries (7011 JP)</a> , <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> , and <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> </li>
</ul>


The power outage warning in Japan on March 22 highlights the precarious nature of energy security in Japan.  
The electricity supply issues come at a time when Japan grapples with high oil prices, Russian imports and still idled nuclear capacity. 
The public attitude towards nuclear restarts is turning more positive. The primary beneficiaries will be Mitsubishi Heavy Industries (7011 JP) , Hitachi Ltd (6501 JP) , and Toshiba Corp (6502 JP) 


Is Japan Falling Back in Love with Nuclear Energy?

Japan

Mitsubishi Heavy Industries, Ltd. is a comprehensive heavy machinery maker. The Company manufactures machinery, ships, turbines and engines, prime movers, aircrafts, and machine parts for military and commercial use.  Mitsubishi Heavy Industries also researches and develops nuclear power plants.

Mitsubishi Heavy Industries (7011 JP)